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Conspicuous consumption and political regimes: Evidence from East and West Germany

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  • Friehe, Tim
  • Mechtel, Mario

Abstract

This paper investigates the influence of political regimes on the relative importance of conspicuous consumption. We use the division of Germany into the communist GDR and the democratic FRG and its reunification in 1990 as a natural experiment. Relying on household data that are representative for Germany, our empirical results strongly indicate that conspicuous consumption is relatively more important in East Germany. Significantly, although we find some convergence, a considerable gap in conspicuous consumption expenditures remains even 18 years after the German reunification.

Suggested Citation

  • Friehe, Tim & Mechtel, Mario, 2014. "Conspicuous consumption and political regimes: Evidence from East and West Germany," European Economic Review, Elsevier, vol. 67(C), pages 62-81.
    • Handle: RePEc:eee:eecrev:v:67:y:2014:i:c:p:62-81
    DOI: 10.1016/j.euroecorev.2014.01.005
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    More about this item

    Keywords

    Conspicuous consumption; Status-seeking; Political regime; Behavioral economics;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • P36 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Consumer Economics; Health; Education and Training; Welfare, Income, Wealth, and Poverty

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